UNITED STATES OF AMERICA 69 FERC 61, 411
FEDERAL ENERGY REGULATORY COMMISSION
18 CFR Part 347
(Docket No. RM94-2-001)
COST-OF-SERVICE REPORTING AND
FILING REQUIREMENTS FOR OIL PIPELINES
Order on Rehearing and Clarification
(Issued December 28, 1994)
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule; Order on rehearing and clarification.
SUMMARY: The Federal Energy Regulatory Commission in ruling on a
request for rehearing is making a minor change to its regulations
that provide revised filing requirements for oil pipelines
seeking to establish new or changed depreciation rates, and
clarifying Order No. 571, issued October 26, 1994. The change is
to ensure that the information provided is in a format that will
protect individual shippers.
EFFECTIVE DATE: The amendment to the regulations is effective
January 1, 1995.
FOR FURTHER INFORMATION CONTACT: Harris S. Wood, Office of the
General Counsel, Federal Energy Regulatory Commission, 825 North
Capitol Street, NE., Washington, DC 20426, (202) 208-0224.
SUPPLEMENTARY INFORMATION: In addition to publishing the full
text of this document in the Federal Register, the Commission
also provides all interested persons an opportunity to inspect or
copy the contents of this document during normal business hours
in Room 3104, 941 North Capitol Street, NE., Washington, DC
20426.
Docket No. RM94-2-001 - 2 -
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UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Cost-of-Service Filing and ) Docket No. RM94-2-001
Reporting Requirements for )
Oil Pipelines )
ORDER NO. 571-A
ORDER ON REHEARING AND CLARIFICATION
Issued: December 28, 1994
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Elizabeth Anne Moler, Chair;
Vicky A. Bailey, James J. Hoecker,
William L. Massey, and Donald F. Santa, Jr.
Cost-of-Service Filing and ) Docket No. RM94-2-001
Reporting Requirements for )
Oil Pipelines )
ORDER NO. 571-A
ORDER ON REHEARING AND CLARIFICATION
(Issued December 28, 1994)
On October 28, 1994, the Federal Energy Regulatory
Commission (Commission) issued Order No. 571, in which it
established filing requirements for cost-of-service rate filings
for oil pipelines; filing requirements for oil pipelines seeking
to establish new or changed depreciation rates; and new and
revised pages of FERC Form No. 6, Annual Report for Oil
Pipelines. 1/ On November 28, 1994, the Association of Oil
Pipe Lines (AOPL) filed a request for rehearing and clarification
of Order No. 571. As discussed below, the Commission clarifies
Order No. 571, and grants in part and denies in part AOPL's
request for rehearing.
DISCUSSION
A. AOPL argues that the Commission cannot prescribe
initial filing requirements for cost-of-service rates in excess
of requirements specified in Section 6 of the Interstate Commerce
1/ Cost-of-Service Reporting and Filing Requirements for Oil
Pipelines, Order No. 571, 59 FR 59137 (November 16, 1994),
III Stats. & Regs. 31,006 (1994).
Docket No. RM94-2-001 - 2 -
Act (ICA). 2/ Section 6(3) provides that a carrier must file a
notice of rate change "which shall plainly state the changes
proposed to be made in the schedule then in force and the time
when the changed rates ... will go into effect; and the proposed
changes shall be shown by printing new schedules ...." These
requirements of Section 6(3) are preserved intact in sections
346.1(a) and (b) of the regulations adopted by the Commission in
Order No. 571. 3/ Thus, AOPL's dispute is with section
346.1(c), which requires that an oil pipeline file statements and
supporting workpapers to make an Opinion No. 154-B cost-of-
service showing as set forth in section 346.2, on the basis that
these requirements go beyond the limiting provisions of
section 6(3).
As the Commission explained in Order No. 571, the
requirement that a pipeline file these statements and workpapers
is justified, not by the filing of information as a part of a
notice of rate change, but by the requirement of Order
No. 561 4/ that the oil pipeline meet the threshold test of
demonstrating a substantial divergence between rates at the
2/ 49 App. U.S.C. 1 (1988).
3/ See 18 CFR 342.1(a) and (b), to be effective January 1,
1995.
4/ Revisions to Oil Pipeline Regulations Pursuant to the Energy
Policy Act, Order No. 561, 58 FR 58785 November 4, 1993),
III FERC Stats. & Regs. 30,985 (1993), order on reh'g and
clarification, Order No. 561-A, 59 FR 40243 August 8, 1994),
III FERC Stats. & Regs. 31,000 (1994). These orders are
jointly referred to as "Order No. 561," unless the text
clearly specifies otherwise.
Docket No. RM94-2-001 - 3 -
indexed ceiling level and the pipeline's cost of service. Rather
than a "filing requirement" for a notice of rate change, the
statements and workpapers must be filed to demonstrate that the
pipeline is entitled to change rates on a cost-of-service basis
as an exception to changing rates under the indexing methodology.
The Commission relied on section 12 of the ICA as the
statutory authority for requiring a pipeline to demonstrate that
it meets the threshold test specified in Order No. 561. 5/
AOPL argues, however, that section 6 establishes initial filing
requirements for a rate change and thus bars the Commission from
requiring the threshold filings at issue here. The Commission
disagrees.
Contrary to AOPL's contention, section 6(3) of the ICA is
not a limitation on the Commission's authority to establish
initial filing requirements but is rather no more than a
specification of the form that a notice of a proposed change in
rates must take. Thus, the Commission's requirements in section
346.1(c) are not contrary to the ICA. Moreover, the Commission
here affirms its view that section 12(1) confers on the
Commission broad powers to regulate the transportation of oil by
pipeline, including those that AOPL claims are precluded by
section 6(3), and thus authorizes the Commission to establish
5/ Section 12 provides, in material part, that "The Commission
may obtain from such carriers ... such information as the
Commission deems necessary to carry out the provisions of
this chapter.... The Commission is authorized and required
to execute the provisions of this chapter...."
Docket No. RM94-2-001 - 4 -
reasonable filing requirements for a cost-of-service rate change
proposal. 6/
Rehearing on this first specification error is therefore
denied.
B. AOPL's second specification of error, that the
Commission imposed unduly burdensome initial filing requirements
for cost-of-service-based rates, is likewise without merit. AOPL
claims that the Commission, by imposing any filing requirements,
ignored its comments regarding the resulting burden that
pipelines would have to bear. AOPL's position, however, is based
on the premise, already rejected, that section 6(3) bars any
initial filing requirements. Thus, the thrust of AOPL's argument
is that any initial filing requirement other than a mere notice
of the rate change proposed, regardless of what it might be, is
too burdensome for pipelines to bear. The Commission disagrees.
The Commission recognizes that there is a filing burden for
pipelines that seek to opt out of indexing. However, because
indexing is the Commission's prescribed, generally applicable
6/ Section 12(1) of the ICA as it existed on October 1, 1977,
governs the authority and duties of the Commission. See
also 49 U.S.C. 10321(a) which by Public Law 95-473, Oct. 17,
1978, 92 Stat. 1337, codified and restated in comprehensive
form, without substantive change, the material part of
section 12(1). Section 10321(a) provides:
The Interstate Commerce Commission shall
carry out this subtitle. Enumeration of a
power of the Commission in this subtitle does
not exclude another power the Commission may
have in carrying out this subtitle. The
Commission may prescribe regulations in
carrying out this subtitle.
Docket No. RM94-2-001 - 5 -
ratemaking methodology, the Commission has concluded that a
pipeline must as a threshold matter justify an exception to that
methodology when it files for cost-of-service rates. As
described earlier, it is well within the Commission's broad
regulatory powers to determine how an oil pipeline is to secure
permission to charge rates based on a method that deviates from
the generally applicable method.
Contrary to AOPL's claims, the Commission has required only
that data necessary for a pipeline to show whether there is a
substantial divergence between its cost of service and revenues
at the index ceiling rate and thus whether it warrants an
exception to indexing. In fact, the Commission chose not to
require certain other additional data. For example, it did not
require a filing of individual point-to-point cost-of-service
calculations in the initial filing of notices of rate change,
recognizing that the burden of such a requirement would not be
justified, particularly since the initial filing need only show
that there is a substantial divergence between the costs of the
pipeline, as reflected in Statement A, and the revenues that
would be produced by the indexed ceiling rates, as reflected in
Statement G. 7/ Thus, the Commission was not arbitrary in its
assessment of minimum filing needs but rather carefully balanced
the need for threshold information against the burden that filing
requirements could impose on pipelines.
7/ Order No. 571, mimeo at 11.
Docket No. RM94-2-001 - 6 -
Rehearing on this second specification of error is therefore
denied.
C. AOPL's third specification of error, that the
Commission erred in determining that new Page 700 of Form No. 6
would impose only a minimal burden on oil pipelines, is denied.
In Order No. 571, the Commission explained in detail why it
believed page 700 of Form No. 6 is necessary for carrying out its
regulatory responsibilities under the ICA and the Energy Policy
Act of 1992. 8/ It described the benefits to the shippers of
having this information available as an initial "substantial
divergence" screen for pipeline rate filings, and as a means of
testing the performance of the index when compared to individual
indexed rates. 9/ Nothing in AOPL's request for rehearing
persuades the Commission to modify its requirements for page 700.
It is correct that if viewed in isolation, the inclusion of
Page 700 in the Form No. 6 would increase the reporting burden on
oil pipelines. However, viewed as a whole, Order No. 571 will
reduce the overall individual oil pipeline reporting burden,
since it reduces or eliminates many of the other reporting
requirements formerly in the Form No. 6. 10/ Further, with
8/ 42 U.S.C. 7172 note (West Supp. 1993).
9/ Order No. 571, mimeo at 16-24.
10/ The Commission found, in Order No. 571, that "The final rule
will reduce the existing reporting burden associated with
Form No. 6 by an estimated 1,628 hours annually, or an
average of 11 hours per response based on an estimated 148
responses. This estimate includes the addition of two new
schedules, the elimination of several schedules, and
(continued...)
Docket No. RM94-2-001 - 7 -
the overall reduction in regulatory burden to be accomplished by
the use of the indexing methodology, the addition of Page 700 as
a safeguard should cause minimal additional burden. 11/
While the initial computation for some of the companies
which have not performed the Opinion No. 154-B calculation may be
somewhat lengthy and may result in an initial, one-time burden
for these companies because of the need to bring the data forward
from 1984 to the current year, any initial burden on making the
calculations is outweighed by the benefits of having the
information available to the Commission to carry out its
regulatory responsibilities. In addition, for each year
subsequent to the initial computation, it would only be necessary
for a company to update the schedules for the most current year.
Thus, the minimal burden imposed in preparing and filing new page
700 is entirely justified when compared to the benefits to
shippers and the Commission of having the information called for
by this new page.
D. The Commission grants rehearing as to AOPL's allegation
that the Commission erred in retaining depreciation study
requirements that could result in the disclosure of confidential
shipper information in contravention of the ICA. In Order No.
10/(...continued)
increasing the reporting thresholds for which oil pipelines
must analyze and report certain data." Order No. 571, mimeo
at 4.
11/ According to AOPL's own numbers, contained in Attachment A
to AOPL's comments filed in this proceeding on September 8,
1994, the burden of producing page 700 shown by some
companies is as small as four hours per year.
Docket No. RM94-2-001 - 8 -
571, the Commission required that an oil pipeline that desires to
establish initial depreciation rates or to change its existing
depreciation rates file certain information supporting such a
rate. The Commission, in response to comments on the Notice of
Proposed Rulemaking (NOPR) in this docket, recognized that
certain information which had been proposed in the NOPR might
lead to such disclosure, and therefore modified the information
originally proposed, providing that the information required by
section 347.1(e)(vi) of the regulations should be provided in a
format that would prevent disclosure of information which would
violate the ICA. It left to the pipeline the specifics of the
format to be used to provide such information. 12/ Moreover,
the Commission also suggested that the pipeline could request
confidential treatment of the information it provides. 13/
It was the Commission's intent that the caveats expressed
not be limited to section 347.1(e)(vi), but rather apply to all
the Part 347 information that would be provided by pipelines.
Therefore, the regulations will be modified to reflect that
information required by Part 347 of the regulations, release of
which would violate Section 15(13) of the ICA, must be provided
in a format that will protect any individual shipper. Moreover,
the general statement in Order No. 571 that the information
12/ Order No. 571, mimeo at 34.
13/ Id.
Docket No. RM94-2-001 - 9 -
provided will be publicly available unless specific confidential
treatment is sought by the carrier is still applicable. 14/
E. Finally, AOPL seeks clarification regarding the use of
new Page 700 of Form No. 6, in particular the significance of the
statement that this schedule would "permit a shipper to compare
the change in a shipper's individual rate with the change in the
pipeline's average company-wide barrel-mile rate." 15/ AOPL
claims such a comparison appears to tell a shipper nothing
concerning the justness and reasonableness of an individual rate.
The information reported on Page 700 will show how a
pipeline's average barrel-mile rate changes from one year to the
next. A shipper can then compare the yearly percentage change in
the average barrel-mile rate with the yearly percentage change in
the rate it is charged to determine whether there is a
substantial divergence between the rate of change in the two
figures such as to warrant a challenge to an indexed rate. Thus,
the Page 700 information alone is not intended to show what a
just and reasonable rate should be.
The Commission orders:
The request for rehearing and clarification is granted in
part and denied in part, as reflected in the body of this order.
14/ Order No. 571, mimeo at 34.
15/ Order No. 571, mimeo at 17.
Docket No. RM94-2-001 - 10 -
List of Subjects in 18 CFR part 347
Pipelines, Reporting and recordkeeping requirements.
By the Commission.
( S E A L )
Lois D. Cashell,
Secretary.
In consideration of the foregoing, Part 347, Chapter I,
Title 18, Code of Federal Regulations, is amended, as set forth
below.
PART 347 - OIL PIPELINE DEPRECIATION STUDIES
1. The authority citation for Part 347 continues to read
as follows:
Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App.
U.S.C. 1-85.
2. In 347.1, paragraph (e) introductory text and
paragraph (e)(5)(vi) are revised to read as follows:
347.1 Material to support request for newly established or
changed property account depreciation studies.
* * * * *
(e) Information to be provided. The information in
paragraphs (e)(1) through (5) of this section must be provided as
justification for depreciation changes. Modifications,
additions, and deletions to these data elements should be made to
reflect the individual circumstances of the carrier's properties
and operations. Any information in paragraphs (e)(1) through (5)
of this section, the release of which would violate Section
Docket No. RM94-2-001 - 11 -
15(13) of the Interstate Commerce Act, must be provided in a
format that will protect individual shippers.
* * * * *
(5) * * *
(vi) A list of shipments and their associated receipt
points, delivery points, and volumes (in barrels) by type of
product (where applicable) for the most current year.
* * * * *